Williams Selyem Releases Study on $2 Billion Impact of Proposed State Regulation to Restrict Water Use for Frost Protection

October 26, 2010

HEALDSBURG, Calif., Oct. 26 /PRNewswire/ — Williams Selyem winery announced today the release of a study on the economic impact of a new regulation proposed by the State Water Resources Control Board (SWRCB) that would restrict vineyards from using the Russian River, its tributaries and connected groundwater as a source of frost protection water. The study is authored by Robert Eyler, Professor and Chair of Economics at Sonoma State University and director of the Center for Regional Economic Analysis at Sonoma State University.

According to the Wine Institute, the California wine industry represents over $100 billion of California’s economy, with Sonoma and Mendocino counties accounting for roughly $25 billion. The report concludes that the regulation could result in significant loss of business income, loss of state and local taxes and loss of land values costing the California economy more than $2 billion annually, including $142 million in lost tax revenue to local governments and Sacramento, $113 million in decreased land values and more than 8,000 jobs lost in Sonoma and Mendocino counties.

“This proposed new State regulation will severely impact California’s economy and tax base and even damage the entire nation both financially and socially. While the impact will be felt dramatically in Sonoma and Mendocino Counties, all of California will be affected and the wine business harmed across the nation due to the prominence and size of the Counties’ wine sector. This is a mistake that Sonoma County and California citizens cannot afford,” says John Dyson, owner of Williams Selyem.

INCOME AND WEALTH REDUCED

Income would be lost due to reduced tonnage from frost damage, which will result in fewer employees and decreased wages across the distribution chain of California’s wine industry. Wealth would also be lost due to changing land values and a reduction in capital investments for items such as vines, rootstocks, irrigation infrastructure and all farming and winemaking equipment. Further, this regulation would act like a tax on vineyard farmers by increasing costs of frost protection and forcing investment in other frost protection methods that are more expensive and less effective.

“Most of Sonoma and Mendocino county winegrowers are small businesses with less than 50 employees,” says Nick Frey, President of the Sonoma County Winegrape Commission. “This regulation risks putting many of these people out of business.”

FAR REACHING EFFECTS ON CALIFORNIA’S ECONOMY

In addition to the negative impact on vineyards, the regulation would have long-term effects on allied industries such as glass companies, barrel coopers, trucking firms, docks, vineyard nurseries, hotels, restaurants and grocery stores. Tourism losses would include over 6200 jobs and local taxes worth over $9.7 million dollars alone.

$142 MILLION IN TAX REVENUES LOST

An estimated $142 million annually in local and state tax revenue would be lost due to this regulation. In addition to the taxes and fees generated throughout the production and distribution channels, the wine also accounts for a significant amount of tourism that comes to California resulting in lost transient occupancy taxes (TOT) and sales taxes.

$113 MILLION IN REDUCED LAND VALUES

The report estimates more $113 million in lost land values over the next five years in Sonoma and Mendocino counties, which would compound the devastating effects of the current recession.

“Sonoma and Mendocino counties represent a large portion of the overall and premium wine industry in California with 17% of bearing and non-bearing acreage and over 26.5% of the current vineyard land values in California,” says Pete Opatz, Vice-President and Senior Viticulturist of Silverado Premium Properties. He continues, “We are huge contributors to the California economy and at this time of economic distress, our state simply cannot afford the potential losses this regulation would bring about.”

THE REGULATION

The regulation is in reaction to two alleged strandings of salmonid fish protected under the Endangered Species Act. Regulators claim that when multiple vineyard owners turned on their pumps at the same time during a frost event, it resulted in an instantaneous drop in water elevation in some tributaries of the Russian River. The regulation has been criticized as overbroad and ill-defined as it issues a complete prohibition on water usage for frost protection unless and until a water management program is approved by the SWRCB.

ABOUT THE STUDY’S AUTHOR:

Robert Eyler is Professor and Chair of Economics at Sonoma State University in California. He earned a Ph.D. from the University of California, Davis in 1998. He earned a B.A. in Economics at CSU, Chico in 1992. He is the author of several academic and impact studies about the wine industry, specifically the lead author of The Economic Impact of the California Wine Industry 2004 commissioned by the Wine Institute. Robert is the director of the Center for Regional Economic Analysis at Sonoma State University and has worked on multiple regional studies for Sonoma, Napa, Marin, and Mendocino counties. He has acted as an expert witness in interstate trade litigation, and as a forensic economist. He has been a visiting scholar at both the University of Bologna and Stanford University. He is also the interim CEO of the Marin Economic Forum, a countywide, public-private partnership for economic development organization in Marin

ABOUT WILLIAMS SELYEM:

Williams Selyem winery was founded in 1979 by winemaking hobbyists Ed Selyem and Burt Williams in a garage in Forestville, California. In less than two decades, the winery achieved cult-status and garnered international acclaim for their Pinot Noirs, Chardonnays and Zinfandels. Today, John and Kathe Dyson, who purchased the winery in 1998, carry on the passion for winemaking without compromise. While nearly all of Williams Selyem’s wines are sold through the winery’s direct consumer mailing list, a limited number of cases are released each year to a select group of the country’s finest restaurants.